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[2023] ACTCA 36
General information, not legal advice.
Court of Appeal (ACT)
2023-09-22
Mossop, McWilliam and Taylor JJ
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Source: the ACT Courts (www.courts.act.gov.au). Converted to plain text by ZoeLaw. Not the official version.
SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY COURT OF APPEAL
Case Title: Findex Group Pty Ltd v McKay Citation: [2023] ACTCA 36 Hearing Date: 25 August 2023 Decision Date: 22 September 2023 Before: Mossop, McWilliam and Taylor JJ Decision: See [230]. Catchwords: PRACTICE AND PROCEDURE – APPLICATION FOR LEAVE TO APPEAL – Application for leave to appeal against interlocutory decision of primary judge on an issue of practice and procedure involving discretion – where appeal seeks to raise denial of procedural fairness and factual errors – reluctance of courts to grant leave to appeal interlocutory orders – where denial of procedural fairness may have effect of occasioning substantial injustice – leave granted PRACTICE AND PROCEDURE – APPEAL – Appeal against orders refusing leave to reopen decision following refusal of an application to amend Statement of Claim – whether primary judge proceeded upon a misapprehension of the facts – whether there was a denial of procedural fairness – appeal allowed – matter remitted Legislation Cited: Corporations Act 2001 (Cth) Court Procedures Act 2004 (ACT), s 5A Court Procedures Rules 2006 (ACT), rr 417, 501, 502, 504, 1613, 1720 Cases Cited: Autodesk Inc. v Dyason (No 2) (1993) 176 CLR 300 Commonwealth v Davis Samuel Pty Ltd (No 12) [2020] ACTSC 312 Findex Group Limited v McKay [2022] ACTSC 192 Findex Group Ltd v iiNet Ltd (Application by ASIC) [2017] NSWSC 853 Findex Group Ltd v iiNet Ltd [2018] NSWSC 1567 Findex Group Ltd v iiNet Ltd (Application by ASIC) (No 2) [2017] NSWSC 1048 Findex Group Ltd v iiNet Ltd [2019] NSWSC 1198 Findex Group Ltd v McKay [2019] NSWCA 93 Findex Group Limited v McKay (No 2) [2023] ACTSC 43 General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125 Gray v Sirtex Medical Ltd [2011] FCAFC 40; 193 FCR 1 House v The King (1936) 55 CLR 499 In re the will of FB Gilbert (deceased) (1946) 46 SR (NSW) 318 In the Matter of Prime City Investments Pty Ltd [2012] NSWSC 1287 Liu v The Age Company Pty Ltd (No 2) [2015] NSWSC 276 Liu v The Age Company Ltd [2016] NSWCA 115; 92 NSWLR 679 McKay v Findex Group Limited; Findex Group Limited v McKay [2023] ACTSC 58 McKay v Findex Group Limited [2022] ACTSC 191 McKay v Paule [2022] ACTCA 72 Notaras v St George Bank Ltd [2005] ACTSC 5; 157 ACTR 1 Paule v McKay [2020] ACTSC 145 Paule v McKay (No 2) [2022] ACTSC 190 Parties: Findex Group Ltd (First Applicant) Findex Services Pty Ltd (Second Applicant) Financial Index Australia Pty Ltd (Third Applicant) Spiro Paule (Fourth Applicant) Danielle Bartholomeusz nee Ludbey (Fifth Applicant) Phillip Hart (Sixth Applicant) David McKay (Respondent) Representation: Counsel M A Friedgut (Applicants) M Karam with H Rodgers (Respondent) Solicitors Harmers Workplace Lawyers (Applicants) Just Dispute Resolution (Respondent) File Number: ACTCA 19 of 2023 Decision Under Appeal: Court: Supreme Court of the ACT Before: McCallum CJ Date of Decision: 12 May 2023 Case Title: Findex Group Limited v McKay (No 3) Citation: [2023] ACTSC 108
THE COURT:
This is an application for leave to appeal from an interlocutory decision of a judge of the court (the primary judge). By that decision, the court dismissed an application made by the applicants to reopen an earlier interlocutory decision which was said to be based upon certain identified factual misapprehensions. The earlier interlocutory decision involved a refusal to permit a Further Amended Statement of Claim to be filed.
There are six applicants for leave to appeal, Findex Group Ltd, Findex Services Pty Ltd, Financial Index Australia Pty Ltd, Spiro Paule, Danielle Bartholomeusz nee Lubdey and Philip Hart. Unless the context requires otherwise, the applicants will be referred to collectively as “Findex”. The respondent is a former employee who is alleged to have sent (anonymously) disparaging correspondence to clients of Findex after he had parted ways with Findex.
The reasons for both decisions were given orally but ultimately published: (a) McKay v Findex Group Limited; Findex Group Limited v McKay [2023] ACTSC 58 (the Amendment Decision); and (b) Findex Group Limited v McKay (No 3) [2023] ACTSC 108 (the Reopening Decision).
The application for leave to appeal was argued concurrently with the appeal.
The essential point sought to be agitated by Findex was that it had been denied procedural fairness in the manner in which the application to reopen the Amendment Decision was argued and decided. Further and alternatively, Findex contended that there were a variety of House v The King (1936) 55 CLR 499 errors in the Reopening Decision.
For the reasons that follow, the application for leave to appeal will be granted and the appeal allowed.
The proceedings will be remitted to the Supreme Court for further determination on whether to permit Findex to reopen.
The litigation matrix underlying this appeal
There are presently four different proceedings pending in the Supreme Court: (a) the present proceedings (SC 464 of 2019) (the disparagement proceedings) which involve claims of a breach of a non-disparagement clause in a contract between Mr McKay and the second applicant (Findex Services Pty Ltd) and related claims of a breach of the Australian Consumer Law; (b) search order proceedings (SC 172 of 2020) which relate to preliminary discovery proceedings and the making of search orders permitting the search of Mr McKay’s residence; (c) defamation proceedings (SC 11 of 2020) in which the fourth applicant (Spiro Paule) seeks damages for defamation; and (d) trespass proceedings (SC 109 of 2020) in which Mr McKay alleges that the search of his residence was unlawful.
The disparagement proceedings and the other related proceedings have a very long and tortured history. The parties have been involved in litigating various disputes against each other since 2016. The disparagement proceedings, search order proceedings and defamation proceedings all came to the court as a result of cross-vesting orders made by the NSW Supreme Court.
The grounds of complaint on this appeal require a detailed understanding of the history and the matters in issue in the various proceedings. It has thus been necessary to set out that history below to a greater extent than might otherwise have been required on an appeal from interlocutory orders. Such matters provide critical context for what occurred before the primary judge and for understanding why error has been established in the findings her Honour made.
The history of proceedings is drawn largely from the chronologies, which were included in the appeal papers, and derived from the affidavit filed in support of the application for leave to appeal. Some of the history of the proceedings up until 2019 was summarised in the decision of Ward CJ in Eq in Findex Group Ltd v iiNet Ltd [2019] NSWSC 1198 at [3]-[31] and is otherwise apparent from decisions of courts referred to in the chronology. To the extent to which any factual material goes beyond what was before the primary judge, it is relevant to the application for leave to appeal insofar as the primary ground of the proposed appeal alleges a denial of procedural fairness.
The genesis of the application to reopen before the primary judge
The issue originally before the primary judge (on the Amendment Decision) was whether to grant leave to Findex to further amend the claim in the disparagement proceedings.
Previously in October 2020, the plaintiffs had filed an Amended Statement of Claim. It was the subject of a contested strike out and summary dismissal dispute which was determined in July 2022: Findex Group Limited v McKay [2022] ACTSC 192. The result of that interlocutory dispute was that one paragraph in the Amended Statement of Claim (paragraph 110) which pleaded the claim for damages was struck out, because it contained a “rolled up broad summary” and did not comply with r 417 of the Court Procedures Rules 2006 (ACT).
No direction was made setting a timetable for filing a further pleading to accommodate the fact that paragraph 110 had been struck out. However, Findex indicated an intention to replead paragraph 110 at a directions hearing before the primary judge on 15 December 2022. At that time, the primary judge directed that Findex file the proposed Further Amended Statement of Claim in the disparagement proceedings by 10 February 2023 and that Mr McKay notify any objections to that pleading by 24 February 2023. The latter date was subsequently proposed by Findex to be amended to 3 March 2023.
On 16 February 2023, Findex filed an application for leave to file a Further Amended Statement of Claim. The grounds for that application included that the plaintiffs “seek to amend the amended statement of claim filed 9 October 2020 to replead and further particularise and further clarify their damages claim in the light of the orders and reasons of McWilliam AsJ dated 27 July 2022, and to update and correct the current positions held by some of the individual plaintiffs”.
In lieu of the previous single paragraph 110 that had been struck out, Findex’s proposed Further Amended Statement of Claim pleaded the following damages components: (a) a claim to recover as damages the costs incurred in the search order proceedings (new paragraphs 109.1-109.19) (“costs claim”); and (b) a claim to recover damages for certain losses incurred in relation to the acquisition of Moore Stephens (Queensland) Limited, (new paragraphs 109.20 to 109.27) referred to as the “Moore Stephens” damages claim.
The decision under appeal
Ruling on additional evidence
At the hearing, counsel for Findex sought to put before the court for the purposes of the appeal certain additional documents that were not before the primary judge. Some of that material was relevant to the claim of a denial of procedural fairness. It is open to admit such material notwithstanding that it was not before the primary judge as it was relevant to establishing that denial. The balance of the material will not be admitted. Some of the documents may become relevant to a question of costs but are not admissible at this stage.
The documents that will be admitted are the documents behind tabs 2, 3, 7 and 9 of the “Revised Folder of the Appellants’ additional materials”. Should leave to appeal be granted?
The application before the court is an application for leave to appeal from an interlocutory judgment on a discretionary matter involving a question of practice and procedure. Each of the integers of this concept mean that the court should be reluctant to grant leave: (a) the decision is interlocutory; (b) the decision is on a matter of practice and procedure; and (c) the decision involves the exercise of discretion. See In re the will of FB Gilbert (deceased) (1946) 46 SR (NSW) 318 at 323.
More generally, the principles applicable to a grant of leave to appeal are summarised in McKay v Paule [2022] ACTCA 72 at [24]. Particularly in a case such as the present, which has been contested in every possible way at every stage, the court must be reluctant to allow decisions of single judges to be made the subject of review, because to do so fragments proceedings and renders proper and timely case management even more difficult than it already is.
In the circumstances of this case, for the reasons set out below, the primary judge made errors of fact in circumstances where, through a combination of circumstances, Findex was denied procedural fairness. The denial of procedural fairness was one which warrants a grant of leave to appeal. It affected the manner in which the court addressed an application to amend pleadings in a way which may ultimately be of significance to the plaintiffs and have the effect of occasioning a substantial injustice. In those circumstances, notwithstanding the general strong reluctance of a court of appeal to grant leave to appeal in matters of practice and procedure involving the exercise of a discretion, leave to appeal should be granted.
Proposed grounds of appeal
The draft Notice of Appeal is 37 pages long. It should be trite to observe that, as a matter of generality, a Notice of Appeal of such length is unhelpful. That unhelpfulness is manifest in this case by the manner in which the grounds of appeal are drafted. There are 13 grounds of appeal, all except one of which is elaborated upon in multiple subparagraphs. Many of the grounds are replete with chaff amongst which it is difficult to find the wheat.
For the purposes of the present application, it is only necessary to deal with four of those grounds, which may be summarised as two complaints: (a) that the primary judge denied Findex procedural fairness in the manner in which she dealt with the reopening application; and (b) that the Reopening Decision involves errors of fact which affected the exercise of discretion.
Both a denial of procedural fairness or a House v The King error ((1936) 55 CLR 499 at 504-505) (which includes a mistake as to the facts) provide a basis for appellate review of a discretionary decision such as that in the present case.
Was there factual error or a denial of procedural fairness in the Reopening Decision?
In reaching the conclusion that she did in the Reopening Decision, the primary judge made a number of errors of fact. The making of those errors of fact arise from a combination of circumstances which, in aggregate, indicate that by the time the application for reopening was determined, Findex had been denied procedural fairness.
The reasons that follow will first explain the history of the litigation, then explain the findings and identify the errors in the reasons given by the primary judge, and then explain why the combination of circumstances leading up to the determination of that application involved a denial of procedural fairness. Commencement of the search order proceedings
On 9 September 2016, Findex commenced proceedings in the NSW Supreme Court for preliminary discovery against iiNet, iiNet (Ozemail) Pty Ltd and LinkedIn for the purposes of discovering the identity of the person responsible for certain damaging publications about them. On 13 September 2016, the NSW Supreme Court (McDougall J) made orders in the search order proceedings granting four of the present applicants preliminary discovery from three internet service providers. On 16 September 2016, the court (Rein J) made orders authorising the search of the respondent’s home. That search order was executed on 20 September 2016. The documents obtained during the search were held in the possession of an independent solicitor.
On 22 September 2016, Mr McKay was joined as a defendant in the search order proceedings.
On 31 October 2016, Mr McKay filed a motion seeking an order that production inspection of approximately 75 percent of the seized documents be refused to any party (McKay motion). Consent orders were made preventing access to the Disputed Documents pending determination of that motion. The documents to which no objection was taken (Undisputed Documents) were provided to Findex’s solicitors, subject to a Harman undertaking.
At the instigation of Mr McKay, ASIC became involved in the proceedings in November 2016 and filed a separate motion, claiming public interest immunity in relation to certain documents (ASIC motion).
On 16 December 2016, a confidentiality regime was established to permit the legal representatives of Findex to view certain documents so as to be able to address the McKay motion.
On 28 April 2017, ASIC’s application in relation to public interest immunity over 38 documents was heard by Ward CJ in Eq. Judgment was delivered on 30 June 2017: Findex Group Ltd v iiNet Ltd (Application by ASIC) [2017] NSWSC 853. A further judgment was handed down in relation to the public interest immunity documents on 11 August 2017: Findex Group Ltd v iiNet Ltd (Application by ASIC) (No 2) [2017] NSWSC 1048.
In November 2017, there was correspondence between the parties as to whether or not causes of action arising out of the documents seized should be added to pre-existing Federal Court proceedings brought by Findex against Mr McKay relating to breaches of a shareholder agreement and the Corporations Act 2001 (Cth). No agreement was reached.
Events leading up to the decision on 12 May 2023
Having provided an overview of the procedural history of the various proceedings since the initial publications in 2016, it is necessary to describe in more detail what occurred in the disparagement proceedings in the lead up to the decision which Findex wishes to appeal. The hearing on 15 December 2022
There was a directions hearing on 15 December 2022 before the primary judge. During the course of that directions hearing there was some discussion of the procedural background to the proceedings. Reference was made to a decision of Ward CJ in Eq in 2018. Counsel for Findex offered to prepare a detailed chronology because “there is so much evidence – it may well be that your Honour may be assisted by a detailed chronology”. Her Honour declined the offer saying that she would “get across enough of the background if I have those key judgments identified”.
On 15 December 2022, the primary judge made directions which included requiring the plaintiffs in the disparagement proceedings to file an application for leave to file their proposed Further Amended Statement of Claim and for the defendant to notify the plaintiffs of any objections to that document. A date was provided for the matter to be argued in the event that agreement could not be reached. Application in proceeding dated 16 February 2023
This application sought leave pursuant to rr 501, 502 and 504 to file a Further Amended Statement of Claim annexed to the application.
The document attached to the application was marked up in both red and green. The red amendments were amendments already made pursuant to leave granted by McWilliam AsJ on 2 October 2020. The green amendments were those for which leave was sought in the 16 February 2023 application. Correspondence prior to hearing
The orders made on 15 December 2022 required that Mr McKay notify Findex of any objections to the proposed amended pleadings by 24 February 2023, later proposed by Findex to be amended to 3 March 2023.
The defendant declined to notify the plaintiffs of his objections. Instead, he adopted an ambiguous position which only crystallised into opposition on 10 March 2023. The position initially adopted on 2 March 2023 contemplated that pleading issues could be preserved until the final hearing and the making of the amendment not opposed. However, on 10 March 2023, that position changed with various objections being notified. The only ground for opposition to the costs claim component of the pleadings was that the claim “seeks to improperly introduce a claim for legal costs in a matter still on-foot - SC172/20”.
There was also a reference to the “Moore Stephens” damages which were said to have been matters which ought to have been identified during the course of the strike out application. The grounds did include generalised complaints about delay but no specific complaint about prejudice.
Lateness of the application: (Reopening Decision [21]) (ground of appeal 3.7, 3.8)
The first factual error is that her Honour found the claim for costs damages was a new claim, made late. As the detailed procedural history demonstrates, the claim for costs of enforcing the contractual non-disparagement clause, including the costs of undertaking the search order proceedings, was not new, and it was not made late.
First, the costs claim was notified to Mr McKay and the court by June 2019. It was part of a pleading propounded as founding a release of the Harman undertaking in respect of documents seized in the search order proceedings (see [44] above). The claim was expressly contemplated in the judgment of Ward CJ in Eq in September 2019 and orders were made preserving the documents for the purposes of the disparagement proceedings (among other proceedings) (see [47] above). The legal representatives for Mr McKay do not appear to have either remembered or appreciated that the undertaking they gave to preserve the documents in the search order proceedings was for the purposes of costs assessment “or otherwise” and that it specifically extended to the disparagement proceedings. Whether by oversight or misunderstanding, the primary judge was led into error by the submissions of counsel for Mr McKay in that regard.
Second, the amendment was not late. Her Honour had, in the Amendment Decision, placed significant reliance upon the amendment being sought at “this very late stage of the proceedings” in the sense of the time elapsed since the proceedings were commenced. The disparagement proceedings were commenced in March 2019. The amended pleading containing the costs claim was in fact notified to Mr McKay and the court in the affidavit of Amy Zhang in June 2019. That is, only three months had elapsed when Findex notified Mr McKay of the intention to amend to include the costs claim in the disparagement proceedings. This was before any defence had been filed, before Findex had leave of the court to rely on documents obtained in the search order proceedings and in circumstances where the Originating Claim had been filed with the intention that it be stayed pending the determination of the application for leave to review and deploy the seized documents in the search order proceedings – a course which Mr McKay did not oppose.
Third, contrary to what the primary judge had concluded in the Amendment Decision, the claim for the costs of investigation and action in relation to the publication had been included in the 9 October 2020 pleading and was subject to the strike out summary judgment application and judgment. The costs claim itself was not refused or rejected in the judgment of McWilliam AsJ of July 2022; only the rolled-up nature of the paragraph by which damages was pleaded was struck out.
Whether they are described as errors or as misapprehensions of the facts, these matters, in turn, infected the approach taken in the Reopening Decision. In the Reopening Decision the primary judge significantly altered the factual basis upon which she determined the matter. Rather than relying on the time elapsed since the proceedings were commenced 2023, her Honour relied instead upon the time between March 2019, when the proceedings were commenced, and November 2019 as being indicative of lateness. The reliance upon that alternative characterisation of the manner in which the application to amend was late led to the primary judge’s conclusion that there was no error in the earlier reasons.
Not possible to explore the merits: (Reopening Decision [23]) (ground of appeal 8.2.3)
At [23] of the Reopening Decision, her Honour addressed the alleged misapprehension that “it is not possible on an application of the present kind to explore the merits” of the submission that Findex was not responsible for the late application. What her Honour said in the Reopening Decision is set out above at [154]. Her Honour did not address the substance of the complaint. Instead, the primary judge made reference to her perception that a theme of the submissions made was to an entitlement to amend and made her “invitation to a party” comment: see [154] above.
In most cases the approach taken by her Honour would have been correct. In complex cases it is usually not possible to accurately assess the merits of a submission that one party was not guilty of any relevant delay. Similarly, in most cases the “invitation to a party” comment made by her Honour would have been accurate. However, in this case, having regard to the uncontested aspects of the unusual procedural history, it was a case in which it was possible to reach a conclusion on the issue of lateness, if the lateness of the application was to be taken into account as a factor against the granting of leave.
The submission made by counsel for Findex at the 22 March hearing was not reflective of an unwarranted sense of entitlement to make an amendment. Rather, it reflected the objective circumstances of the procedural history of the case. The objective circumstances were that, up until the point of cross-vesting of the proceedings to the Territory (20 June 2019), the search order proceedings were continuing and the parties had agreed that the current proceedings would not progress. Even though the disparagement proceedings had been cross-vested, the search order proceedings remained contested in New South Wales. Following the transfer of the disparagement proceedings, the parties were engulfed in Mr McKay’s largely unsuccessful attempt to terminate them. The result of these attempts was the striking out of paragraph 110 of the pleading. Given the necessity to include a claim for damages and replead paragraph 110, an “unrolling” of the “rolled up” pleading was an obvious and necessary step in the context of the history of the case.
This error is closely related to the error concerning the lateness of the application. As pointed out above, that factual error fell into the category of errors which it was appropriate to draw the primary judge’s attention to. Extremely large scope (Reopening Decision [25], [36]) (ground of appeal 6)
Her Honour had determined the matter on the basis that the costs claim would be of “extremely large scope”. Her Honour reconsidered that finding in the Reopening Decision based on a review of the pleadings and found that she had made no misapprehension. She therefore concluded that it provided no basis for reopening her earlier decision. The primary judge found that the subsequent introduction of reference to “assessment” did not indicate that her earlier decision, prior to that clarification, involved any misapprehension.
Relief
The Notice of Appeal seeks orders that: (a) the orders made on 12 May 2023 be set aside; and (b) leave be granted to the applicant to file the Further Amended Statement of Claim annexed to its application dated 28 April 2023.
Further, it seeks an order to the effect of order 3 in its application of 28 April 2023 or the matter be remitted for that to be determined. In the alternative, the Notice of Appeal seeks a declaration that the Supreme Court has power to vacate the interlocutory decision made on 23 March 2023 and a remittal of the application for rehearing.
It is not appropriate for this Court to grant leave to file the Further Amended Statement of Claim. The issues on appeal were confined to the Reopening Decision, even though that necessarily involved consideration of the Amendment Decision. Given that the court has found errors in the Reopening Decision and that the manner in which the application of 28 April 2023 was dealt with involved a denial of procedural fairness, it is appropriate to set aside the Reopening Decision. That is a matter which should be remitted to the Supreme Court to be properly determined. The making of a declaration that the court has power to reopen the decision would lack utility as the existence of such a power was, ultimately, uncontroversial. The question was whether or not that power should be exercised in the circumstances.
It will be a matter for Findex as to whether, having been successful in having the Reopening Decision set aside and with the benefit of these detailed reasons, it is unnecessary to pursue the reopening application. It may be that there are other ways by which the parties or the court are able to make some progress towards a trial of the proceedings. Section 5A of the Court Procedures Act contemplates the application of flexibility and common sense to achieve its main purpose and objectives. It is not appropriate for the Court of Appeal to determine how that is to occur.
Orders
I certify that the preceding two hundred and thirty [230] numbered paragraphs are a true copy of the Reasons for Judgment of the Court Associate: Date: 22 September 2023
Findex Group Pty Ltd
McKay [2023] ACTCA 36
(1993) 176 CLR 300
(1964) 112 CLR 125
(1936) 55 CLR 499
In January 2018, Findex filed a motion seeking that the McKay motion be dismissed for want of prosecution. Findex also sought consent that would allow the Undisputed Documents to be used in the Federal Court proceedings. Mr McKay did not consent. Instead, he filed a motion seeking that the search order be discharged and all copies of the seized documents be returned. Mr McKay declined invitations to have the consolidation of the various issues in one proceeding in the Federal Court.
On 24 April 2018, the hearing of the Findex January 2018 motion and the McKay February 2018 motion commenced. The proceedings were adjourned until September 2018.
In June 2018, the confidentiality regime was varied to permit junior counsel for Findex to review the documents the subject of the McKay motion. Later, senior counsel was also included.
In July 2018, Findex filed an amended notice of motion seeking release from the Harman undertaking in relation to the documents seized pursuant to the search order.
In September 2018, the adjourned hearing recommenced before Ward CJ in Eq. The position of Findex was that it wished to review the documents before instituting its proceedings.
In October 2018, judgment was delivered by which Ward CJ in Eq refused Findex access to the Disputed Documents: Findex Group Ltd v iiNet Ltd [2018] NSWSC 1567. The judgment did not relate to the Harman undertaking in relation to the Undisputed Documents as that issue had been deferred by consent. Findex sought leave to appeal from that decision.
The application for leave to the Court of Appeal was heard on 2 April 2019 and that application was dismissed on 3 May 2019: Findex Group Ltd v McKay [2019] NSWCA 93. Commencement and cross-vesting of the disparagement proceedings
In March 2019, a Statement of Claim was filed in the NSW Supreme Court. This was the commencement of the current proceedings, being the disparagement proceedings. It was filed with the intention that it be stayed pending the determination of the application for leave to review and deploy the seized documents in the search order proceedings.
On 20 June 2019, orders for the cross-vesting of the disparagement proceedings to the ACT Supreme Court were made by consent. These were given the file number SC 464 of 2019. The release of the Harman undertaking in respect of the documents seized in the search order proceedings
On 28 May 2019, Findex notified Ward CJ in Eq that it intended to proceed with the application that had been deferred by consent for release of the Harman undertaking. The evidence in support of that application included an affidavit filed on 7 June 2019 annexing a proposed Amended Statement of Claim, which included as a particular of damages a claim in the following terms: In addition, Findex, on its own behalf, and on behalf of each of the plaintiffs, incurred substantial expense in investigating the source of the anonymous and pseudonymous representations as foresaid and in taking action in relation to them.
Directions were made on 20 June 2019 (when the disparagement proceedings were cross-vested to this jurisdiction) in relation to the application for a release of the Harman undertaking and the motion relating to the documents sought by Mr Paule. The hearing of those applications occurred before Ward CJ in Eq on 24 June 2019. Her Honour reserved judgment. Commencement and cross-vesting of the defamation proceedings
Two weeks after judgment was reserved, Mr Paule made an urgent application for interim orders to be made to permit the filing of a Statement of Claim (which later became the defamation proceedings) because of the imminent expiry of a limitation period. There was an urgent hearing on 15 July 2019, following which Ward CJ in Eq gave Mr Paule leave to file a Statement of Claim for defamation on a provisional and conditional basis pending delivery of her Honour’s judgment in the application for release of the Harman undertaking.
Ward CJ in Eq ultimately delivered judgment on 11 September 2019, granting release from the Harman undertaking in relation to specific documents and making orders for the return or destruction of other seized documents subject to certain undertakings by Mr McKay’s solicitors: Findex Group Ltd v iiNet Ltd [2019] NSWSC 1198. The costs of the search order proceedings, and their future determination, was very much a matter in contemplation as indicated by [164] of her Honour’s judgment: The qualification I add to this is that I consider that Mr McKay’s legal representatives should retain a complete record of the material served or filed in the Court proceedings at least for the duration of the respective sets of proceedings now on foot (such that, if necessary, access could be made to that in the future whether for costs assessment purposes or otherwise). An undertaking to that effect (in relation to the Annexure C document) was proffered by the solicitors and I consider that such an undertaking is acceptable (though I will require an extension of the undertaking to cover not just the Cross-Vested Proceedings but also the Defamation Proceedings now on foot). (Emphasis added.)
The reference to the “Cross-Vested Proceedings” was a reference to the disparagement proceedings. Part of the orders made by her Honour included a requirement that Mr McKay’s solicitors provide a written undertaking to retain a complete copy of all documents filed and served in the search order proceedings and of the “Subject Documents” until the final disposition of the disparagement proceedings and the defamation proceedings and any appeals therefrom.
In September 2019, there were further orders consequential upon the decision of Ward CJ in Eq.
There was an issue about whether the defamation proceedings should also be cross-vested. On 11 October 2019, Hoeben J determined that the question of cross-vesting should be determined prior to the question of the extension of the limitation period. Further orders were made by Hoeben J on 21 October 2019. An application to cross-vest the defamation proceedings was filed on 6 November 2019.
On 19 November 2019, Mr McKay indicated that he would consent to the cross-vesting of the defamation proceedings and orders were made to that effect on 22 November 2019. Cross-vesting of the search order proceedings
On 20 December 2019, Mr McKay indicated his intention to seek to enforce the undertaking as to damages and hence orders were made by Ward CJ in Eq that the exhibits be retained on the court file.
On 13 March 2020, Mr McKay filed a motion in the NSW Supreme Court seeking an enquiry as to damages in the search order proceedings.
On 1 April 2020, Ward CJ in Eq transferred the search order proceedings to the ACT Supreme Court. They became proceedings SC 172 of 2020. Continuation of the disparagement proceedings in the ACT Supreme Court
On 12 November 2019 and following the transfer to this Court, Findex filed an application to amend the Statement of Claim in the disparagement proceedings. The proposed amendments were to include the documents over which a Harman release had been granted by Ward CJ in Eq and other amendments consequential on the cross-vesting of the proceedings. The proposed amended Statement of Claim included, as a particular to paragraph 110, the following allegation: In addition, Findex, on its own behalf, and on behalf of each of the plaintiffs, incurred substantial expense in investigating the source of the anonymous and pseudonymous representations as foresaid and in taking action in relation to them.
On 20 December 2019, pursuant to orders made by consent on 15 November 2019, Mr McKay served a “schedule of concerns” or “concerns notice”relating to the proposed Amended Statement of Claim in the disparagement proceeding. That included a statement that: The defendant does not consider that any AON v ANU like issues arise given that no defence has yet been filed. Therefore, there is the opportunity for the plaintiffs to amend the statement of claim as they see fit, but in a way that fulfils the functions of pleadings as set out in paragraph 4 above and consistent with the applicable rules of court.
On 6 April 2020, Mr McKay filed an application seeking that the disparagement proceedings be summarily dismissed, struck out or permanently stayed. Mr McKay filed an amended application, seeking the same relief but on additional grounds, on 22 June 2020.
On 2 October 2020, McWilliam AsJ gave Findex leave to file an Amended Statement of Claim subject to Mr McKay’s then pending strike out application. The Amended Statement of Claim was filed on 9 October 2020. It contained particulars to paragraph 110 in the same terms as had been contained in the version of the pleadings provided to Mr McKay in June 2019 (see [44] above) and November 2019 (see [55] above).
The hearing of Mr McKay’s summary dismissal application commenced on 4 February 2021 and continued on 24 March 2021. The parties then engaged in a regime for written submissions, which concluded on 9 November 2021. Judgment on the application was then reserved. Continuation of the defamation proceedings in the ACT Supreme Court
On 17 February 2020, Mr Paule filed an application for an extension of time in the defamation proceedings. Following directions made by Crowe AJ on 1 May 2020, the application was split into a hearing dealing with the proposed amendment of the Statement of Claim, and a separate hearing dealing with the remaining issues relating to the extension of the limitation period.
On 7 May 2020, Crowe AJ heard Mr Paule’s application for leave to file an Amended Statement of Claim in the defamation proceedings. On 5 June 2020, Crowe AJ gave judgment in favour of Mr Paule, permitting him to file an Amended Statement of Claim: Paule v McKay [2020] ACTSC 145, subject to determination of the limitation question.
On 31 August 2020, McWilliam AsJ commenced hearing Mr Paule’s application for an extension of time to commence his defamation proceedings.
On 28 October 2021, the application for an extension of time in Mr Paule’s defamation proceedings was further heard by McWilliam AsJ. The application had been put on hold since the earlier hearing because the parties were, evidently unsuccessfully, attempting to settle the proceedings. Judgment was reserved. Commencement of the trespass proceedings
On 24 March 2020, Mr McKay served further proceedings alleging trespass arising out of the execution of the search order. They are the trespass proceedings (SC 109 of 2020). On 9 June 2020, Findex filed an application seeking to summarily dismiss, strike out or permanently stay the trespass proceedings.
On 17 February 2021, McWilliam AsJ commenced hearing Findex’s application to summarily dismiss the trespass proceedings.
On 15 November 2021 (and following the unsuccessful settlement negotiations), there was further argument before McWilliam AsJ on Findex’s application to dismiss the trespass proceedings. Judgment was reserved. The combined progress of the litigation from July 2022
On 27 July 2022, McWilliam AsJ delivered judgment in the trespass proceedings: McKay v Findex Group Limited [2022] ACTSC 191, in the disparagement proceedings: Findex Group Limited v McKay [2022] ACTSC 192 and in the defamation proceedings: Paule v McKay (No 2) [2022] ACTSC 190. In the disparagement proceedings, paragraph 110 of the Amended Statement of Claim was struck out but Mr McKay’s application was otherwise dismissed. As we have said, paragraph 110 was struck out because it was a “rolled up broad summary” and did not comply with r 417 of the Court Procedures Rules 2006 (ACT). There were directions about exchanging submissions on costs. No direction was made setting a timetable for filing a further pleading to accommodate the fact that paragraph 110 had been struck out.
In the trespass proceedings: (a) On 31 August 2022, Mr McKay filed an Amended Statement of Claim and Originating Application. (b) On 29 November 2022, Findex served an application to strike out or summarily dismiss the Amended Statement of Claim filed. (c) On 16 March 2023, the Findex strike out application in the trespass proceedings was heard before the primary judge. Reasons were delivered as part of the Amendment Decision on 23 March 2023.
In the search order proceedings orders had been made as part of the judgment in the trespass proceedings on 27 July 2022 that the search order proceedings would travel together with the trespass proceedings.
In the defamation proceedings: (a) On 12 October 2022, Mr McKay filed an application for leave to appeal from McWilliam AsJ’s 27 July 2022 judgment. (b) On 7 December 2022, Mossop J heard Mr McKay’s application for leave to appeal. (c) On 22 December 2022, Mossop J dismissed the application for leave to appeal in the defamation proceedings that had been filed on 12 October 2022: McKay v Paule [2022] ACTCA 72.
In the disparagement proceedings: (a) On 15 December 2022, there was a directions hearing before the primary judge in which Findex indicated an intention to replead paragraph 110. Findex was directed to file the proposed Further Amended Statement of Claim in the disparagement proceedings by 10 February 2023. Mr McKay was directed notify any objections by 24 February 2023. The latter date was subsequently proposed by Findex to be amended to 3 March 2023. (b) The issue of costs in the disparagement proceedings continued to be agitated before McWilliam AsJ in February 2023, with judgment delivered on 10 March 2023 determining the question of costs of the summary dismissal application in favour of Findex: Findex Group Limited v McKay (No 2) [2023] ACTSC 43. (c) On 16 February 2023, Findex filed an application for leave to file a Further Amended Statement of Claim. The grounds for that application included that the plaintiffs “seek to amend the amended statement of claim filed 9 October 2020 to replead and further particularise and further clarify their damages claim in the light of the orders and reasons of McWilliam AsJ dated 27 July 2022, and to update and correct the current positions held by some of the individual plaintiffs”. The amendments included the search order damages and Moore Stephens damages components referred to at the outset of these reasons (see [16] above). (d) On 10 March 2023, Mr McKay notified grounds of objection to the proposed Further Amended Statement of Claim. In relation to the search order damages claim, it was said “the proposed further amended statement of claim seeks to improperly introduce a claim for legal costs in a matter still on-foot – SC172/20.” The amendment application in the disparagement proceedings was put over until 22 March 2023. (e) On 22 March 2023, the hearing of the amendment application in the disparagement proceedings occurred before the primary judge as described in more detail below. (f) On 23 March 2023, the primary judge gave oral reasons for dismissing the application and directed the parties to bring in short minutes in accordance with those reasons. (g) On 11 April 2023, there was a directions hearing before the primary judge. (h) On 28 April 2023, Findex filed an application seeking to reopen the Amendment Decision to the extent necessary to permit the filing of a Further Amended Statement of Claim and the hearing of each of the matters before the court by a single judge with evidence in one to be evidence in each other. (i) On 3 May 2023, there was a directions hearing before the primary judge. (j) In relation to the reopening application, written submissions were provided by the parties and the hearing of the 28 April 2023 application occurred on 11 May 2023. On 12 May 2023, the primary judge dismissed the application and gave her reasons orally. (k) The present application for leave to appeal was filed on 19 May 2023.
On the evening before the hearing on 22 March 2023 the solicitor for Findex communicated with the primary judge’s associate, asking if arrangements could be made to have the affidavits referred to in paragraphs 5-6 of the affidavit of Lauren Brouwer-French dated 21 March 2023 (an affidavit filed in response to an affidavit to be relied upon by Mr McKay) available in court. The hearing on 22 March 2023
At the commencement of the hearing the primary judge indicated that the estimate for the proceedings was two hours and that she would keep the parties to that estimate.
Counsel for Findex read the affidavit of Lauren Brouwer-French dated 16 February 2023.
There was an objection to paragraphs 9 and 24 and her Honour indicated that she would read those paragraphs as a submission.
Counsel for Mr McKay read the affidavit of Bede Webster dated 22 June 2020 other than paragraphs 6-8 and did not tender annexures A and B to that affidavit.
Counsel for Findex read in reply the affidavit of Lauren Brouwer-French dated 21 March 2023 except for paragraphs 9-26. In relation to that affidavit, her Honour indicated that she was “not quite sure what any of this goes to” as it described procedural history. She asked counsel for Findex to go to the “main game, about paragraph 110 and the new pleading”. Counsel for Findex indicated that he was happy to leave the contents of that affidavit in reply and see whether counsel for Mr McKay made any submissions which required him to address it.
Counsel for Findex indicated that McWilliam AsJ had struck out paragraph 110 and that the amended pleading was in order to make the damages claim as clear as possible. The additional paragraphs 109.1-109.27 were intended to outline the basis upon which contract damages or damages because of the misleading conduct were claimed. The primary judge summarised the amendments as being that the plaintiffs in the preliminary discovery proceedings (being the search order proceedings) were claiming from Mr McKay the costs of bringing those proceedings. Her Honour queried as to how any party other than the plaintiffs to the preliminary discovery proceedings could claim damages. Her Honour queried where the losses suffered by each individual plaintiff were explained in the paragraphs and whether that was sufficient to let the defendant know the case it had to meet.
Counsel made brief reference to the “Moore Stephens” damages claimed at paragraphs 109.20-109.27. Her Honour asked how aggravated damages might be claimed for a breach of contract that some of the parties were not party to. Counsel indicated that that was claimed both as a matter of contract and under the Australian Consumer Law.
Her Honour invited counsel to address other issues in reply.
Counsel for Mr McKay articulated two broad bases upon which the application was opposed. The first was that the amendments were deficient as a matter of form and the second were discretionary reasons.
So far as the first was concerned, he submitted that the pleading did not do what McWilliam AsJ had required to be done in relation to paragraph 110. He made the following submissions: (a) It was unclear how five of the six plaintiffs were bringing claims in circumstances where the sixth was suing as a trustee of such claims. (b) The pleading was defective because it did not indicate who in fact spent the money that was claimed by way of costs. (c) There was a question as to whether aggravated damages could be claimed by the contractual party where the damages held in trust are those of individuals. (d) In respect of paragraphs 102 and 103, the pleading did not disclose how the claim of mental distress arose. It was inappropriate to have individuals seeking a global sum for hurt feelings, humiliation and embarrassment which would necessarily be the subject of an individual enquiry in relation to each of them. (e) Almost seven years after the event and four years after the proceeding was commenced, Findex was pleading, for the first time, a claim for costs. The claim for costs was “all brand-new” and had “never been raised at any time of the last four years”. Issues of “efficiency” “would be a reason in itself to [refuse] it”. Costs issues were at large in the [search order] proceedings still before the court. It would be “a two-week trial about what went on in the New South Wales Supreme Court”. (f) The discretionary point was that there is no explanation in the affidavit in support as to why it was not flagged that any stage in the four years that the proceedings have been on foot. The explanation in the affidavit in support was that the additional pleading was to further particularise and clarify the damages claim and to update and correct the current positions held. (g) Two new entities were being added to the pleadings in paragraphs 3.1 and 3.2 without a proper explanation. (h) The claim for time spent by a Rosario Patane was “novel as well”. (i) Paragraph 109 should be refused altogether. (j) The attempt to particularise paragraph 110 was inadequate because there was still no individual particularisation of what loss had been sustained by which plaintiffs.
Counsel for Mr McKay then made submissions in relation to some proposed orders which would have given the plaintiff the opportunity to plead paragraph 110 “in a way that does indicate the loss and damage that has been suffered by each of them”.
In submissions in reply, counsel for Findex addressed a number of the submissions that had been made by Mr McKay. He submitted: (a) In relation to the suggestion that it was a new claim, the struck through words in the proposed Amended Statement of Claim that indicated that a claim for “substantial expenses investigating the source of the anonymous and pseudonymous representations” was a pre-existing claim. (b) The plaintiffs have in no way been responsible for any delay in this case. It was only in September 2021 that all of the documents which had been seized in the search were obtained. In March 2019 proceedings had been commenced but “were, in effect, put on hold pending the determination of Mr McKay’s applications which were to prevent Findex … from having access to the documents”. Those applications were only finally determined in September 2021. (c) In response to a question from the primary judge about the delay from 27 July 2022, counsel referred to the evidence in reply and submitted that there were very substantial things happening, there was no delay and referred to paragraphs 31-45 of Lauren Brouwer-French’s affidavit of 21 March 2023. He submitted that the plaintiffs had never been criticised for any type of delay. (d) The plaintiff was attempting to clarify the damages paragraph which was always there. (e) In response to the contention that it was novel for damages like that to be claimed in a case like this, he submitted that this was a matter for trial and the damages either flowed directly or were in the reasonable contemplation of the parties. (f) In answer to a question from the primary judge as to why the parties who were not privy to the contract were parties to the proceeding, he referred to the pleading in paragraph 17 which explained the alternative bases upon which the claim was put.
The primary judge asked whether the 9 October 2020 claim was the first time that the claim for investigation costs had appeared on the pleadings. Counsel indicated that it was the first time. The primary judge also enquired whether Findex accepted that each of the matters in paragraph 109 would have to be proved, whereas otherwise they would be left to an assessor. Counsel indicated that there would have to be a determination whether Findex was entitled to the costs incurred in those preliminary discovery proceedings and pointed out that whether or not such an order was made may be affected by the orders made in the subsequent proceedings.
Counsel for Mr McKay was then asked about the 9 October 2020 pleading and what submission he had in relation to the claim included in the 9 October 2020 version. He was also asked about how the costs of preliminary discovery proceedings should be dealt with. During the course of his submissions, he indicated that Mr McKay was not even a part of the preliminary discovery proceedings as opposed to the proceedings that followed relating to access to documents.
Her Honour indicated that she would give her reasons orally the next day. At the end of the hearing, counsel for Findex gave her Honour some references to cases including the line of authority that resulted in Gray v Sirtex Medical Ltd [2011] FCAFC 40; 193 FCR 1. The Amendment Decision – 23 March 2023: [2023] ACTSC 58
At 3pm the next day her Honour delivered her reasons orally. Those reasons related to an application that had been heard on 16 March 2023 in relation to the trespass proceedings as well as the application that had been heard the previous day in relation to the disparagement proceedings.
The reasons in relation to the trespass proceedings were given first. Her Honour then turned to the disparagement proceedings. She recited the history leading to the application to file an amended pleading. She referred to the two principal contentions in opposition to the grant of leave namely, first, that the pleading was deficient and did not address the deficiencies identified by McWilliam AsJ, and second, that as a matter of discretion the court should refuse leave because the amended pleading travels “well beyond” what was contemplated by McWilliam AsJ.
So far as the continued pleading deficiencies were concerned: (a) Her Honour agreed that the introduction of the additional entities without any attempt to make them parties to the proceedings was confusing and embarrassing. (b) Her Honour found that the individual claims made by each plaintiff had been made “more confused” by the amended pleading and gave two examples of how that was the case. (c) So far as the second complaint was concerned, her Honour identified that this complaint related to paragraphs 109.1-109.19. She recorded the submission as being that the claim was “entirely new”, that it was large in scope and the court was already seized of the issue in separate proceedings.
Her Honour then referred to the submissions made by counsel for Findex. She recorded counsel’s submission that the costs claim had been included in the Amended Statement of Claim but found that that “it was a proposed amendment which was not allowed” and that “There has never previously been on the pleading a claim for the costs of the preliminary discovery proceedings as part of the damages in the disparagement proceedings” (at [73]).
The primary judge then found that it was “an allegation of extremely large scope” and that to permit the parties to make that claim at this stage “would, in effect, see this Court perhaps not fully rehearing those proceedings but certainly hearing a very large scope of evidence as to the course of those proceedings” (at [73]). On that point she said “the sheer size of the claim and the extent to which it will expand the scope of these proceedings, when a remedy is available to the Findex parties by the mechanism of obtaining a costs order in the preliminary discovery proceedings, affords a reason for exercising the discretion not to permit the amendment at this very late stage of the proceedings” (at [74]). The reference to “late stage” was clarified as being “the time that has elapsed since the proceedings were commenced without the pleadings progressing in any way”. She described the submission made on behalf of Findex as “that the Findex parties are not responsible for any delay; they commenced proceedings in March 2019 but only obtained the documents required to prosecute them in 2021 and that the proceedings were “put on hold” by Mr McKay’s fight to get the documents back”. However, she said “It is not possible, on an application of the present kind, to explore the merits of that kind of assertion. The simple fact is that what is sought to be introduced now is an extremely large additional claim as to which the plaintiffs require leave and as to which the scope of the claim would be so large as to warrant rejection at this stage” (at [76]).
Her Honour then referred to the authorities provided by counsel for Findex including Gray v Sirtex and indicated that “None of those authorities supports the proposed claim here, where the costs of earlier proceedings against Mr McKay are sought as damages and later proceedings against him” (at [79]) (emphasis in original). Her Honour indicated that the application of the General Steel test (General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125) was not appropriate as what was being sought was “an indulgence to expand the scope of their claim in the context of the very complex litigation in cross-litigation between these parties which, in my view, will unduly expand the scope of these proceedings” (at [80]). Her Honour indicated that her consideration of paragraphs 109 and 110 failed to address the concerns of McWilliam AsJ at [94]-[105] of the earlier judgment.
Her Honour indicated that she intended to refuse leave to file the Further Amended Statement of Claim but would make orders as suggested by counsel for Mr McKay, in particular, an order that would permit Findex to plead paragraph 110 in a way that does indicate the loss and damage that has been suffered by each of the parties and makes appropriate differentiation between them. Her Honour directed the parties to bring in short minutes of order in accordance with those reasons and listed of the matter on 11 April 2023 for further directions.
Immediately upon the conclusion of the giving of those reasons, counsel for Findex drew her Honour’s attention to two matters. He said that he was doing so under the slip rule. One matter was in relation to the disparagement proceedings and one in relation to the trespass proceedings. So far as the disparagement proceedings were concerned, he drew attention to the fact that the reasons had indicated that the statement claiming damages for expenses was not part of the Amended Statement of Claim but rather a proposed Amended Statement of Claim. Her Honour indicated that she understood that the strike out application was taken as a proxy for or coinciding with the issue of leave to amend and paragraph 110 was the paragraph that her Honour did strike out. Counsel for Findex indicated that her Honour was correct except that the basis of McWilliam AsJ’s decision was not the particular in the pleading raising the costs as damages claim. Counsel indicated that he wanted to check whether or not the particular paragraph had in fact been crossed out earlier. Her Honour indicated that if that was the case then it was not really a slip rule matter, but did note that Findex’s position was protected in that “it is noted that I may have proceeded on a misapprehension”. Counsel then referred to an issue arising in relation to the trespass proceedings. There was then discussion of an appropriate date and 11 April 2023 was settled upon. The hearing on 11 April 2023
On 11 April 2023, senior counsel who then appeared for Findex said that the written reasons had been published the previous Wednesday and that the Findex interests wished to consider “whether to draw to your Honour’s attention some matters that may have been overlooked in your Honour’s reasons”. Her Honour queried what process was proposed, whether it was an application of the slip rule or the court’s power to set aside an order before it is entered. Senior counsel said, “I’ll need to hunt up the authorities that express the discretion that we are seeking to invoke.” Her Honour made reference to the decision of the High Court in Autodesk Inc. v Dyason (No 2) (1993) 176 CLR 300 and the power in r 1613 of the Court Procedures Rules. Her Honour indicated “I should indicate for your benefit I would take some persuading that it wasn’t preferable for you simply to bring forward the amended pleadings.” She indicated that the proceedings “have been sitting in the court’s lists for years” and that the only order that she had made was for the parties to bring in short minutes. Her Honour said “if there’s an issue about the scope of the amendment I have foreshadowed will be permitted in my judgment, bring forward an amended pleading and let’s argue about it. But these parties have to get on with these proceedings.” Her Honour later indicated that if a direction was sought that was dealt with in the judgment, then “you would need to argue the Autodesk kind of argument”. The matter was then listed on 26 April 2023. The application dated 28 April 2023
The matter does not appear to have been heard on 26 April 2023. On 28 April 2023, the Findex parties filed an application in proceeding. The application in proceeding sought the following orders: 1. Order that the interlocutory direction made on 23 March 2023 that the parties agree Short Minutes of Order giving effect to the reasons orally published on that day (the Reasons) be vacated in so far as may be necessary for the purpose of making Orders 2 and 3 below; 2. Order pursuant to Rules 501 and/or 502 and/or 503 of the Court Procedure Rules 2006 (ACT), and/or pursuant to the inherent jurisdiction of the Court, that leave be granted to the plaintiffs to file the Further Amended Statement of Claim (FASOC) annexed to this application; 3. Order pursuant to Rule 270(2)(b) of the Court Procedure Rules 2006 (ACT) that these proceedings be heard together with proceedings SC172 of 2020 (the Undertaking Proceedings), SC11 of 2020 (the Defamation Proceedings) and SC109 of 2020 (the Trespass Proceedings), and that evidence in one proceeding be the evidence in each of the other proceeding; 4. Costs; 5. Further or alternative relief.
The grounds were set out in that application at great length. The grounds identified six assumptions underlying the reasons which were said to be incorrect. In summary, they were that: (a) The costs claim was raised for the first time in the proposed Further Amended Statement of Claim, it was “entirely new” and made “at a very late stage” of the proceedings. (b) That the costs claim did not form part of the Amended Statement of Claim filed on 9 October 2020. (c) That it was not possible to explore the merits of the submission on behalf of Findex that Findex was not responsible for the claim being made at this stage of the proceedings. (d) That the costs claim gave rise to a claim of “extremely large scope”. (e) That the Further Amended Statement of Claim failed to specify whether the claims for damages were based upon the plaintiff’s contractual claim or statutory cause of action. (f) That the introduction of “further parties” was confusing and embarrassing without making any attempt to make them parties to the proceedings.
The basis for the contention that the assumptions were incorrect were set out at great length in the application. However, the statutory or other basis for the court to reopen an interlocutory decision was not articulated in the application. The hearing on 3 May 2023
At the commencement of the hearing on 3 May 2023, the primary judge indicated that she had been provided with “duelling short minutes of order”. She asked senior counsel who then appeared for Findex to go first because “it is not clear to me what is the basis on which the court would revisit the judgment” and “I think I’d want to be persuaded that order one is appropriate, that that is having regard to the principle of finality and the consideration of that principle in the decision of the High Court in Autodesk v Dyason”.
Counsel for Mr McKay had suggested that there be no written submissions “in order to not have this balloon out too much” but agreed that “some short submissions certainly identifying the basis for this proposed variation which doesn’t appear in the application itself would be useful”.
Senior counsel for Findex indicated that Findex “had thought that by wrapping up the proposed orders one, two, and three – the single application – and progressing them together that would be the most efficient course”, however accepted that, if the court wished to address proposed order one, namely, “should your Honour’s judgment be – or orders be varied at all”, then he suggested written submissions.
Her Honour then expressed the view that there may be overlap between the issue of whether the orders should be set aside and the issue of the proposed amendments. Counsel for Findex indicated that there would be overlap and that whether or not the order should be varied “would properly be considered in light of the variation for which we contend” in the proposed Further Amended Statement of Claim.
Her Honour then asked counsel for Mr McKay whether there was a “false economy” in addressing the issues separately. Counsel for Mr McKay indicated that Findex “has a very high bar to get over”. He suggested that an application for leave to appeal was the proper course. He submitted that the “actual basis of order one” was not articulated and that he had not been told “whether it’s brought under some rule of the Court Procedures Rules or some principle”. He submitted that to be forced back into a substantive argument again about what “is a significant new version of the pleading but which proceeds on the basis that your Honour’s judgment of 23 March doesn’t stand” would be inefficient and antithetical to appropriate procedure. He submitted that the applicant “would need to show some change in circumstances”.
Those submissions brought the primary judge back to her original view for which she set a date. Counsel for Findex enquired that what her Honour had in mind was “an argument confined to the question of whether there is both power and grounds upon which to make order one in our application”. Her Honour confirmed that. There were then some further discussions about written submissions before the proceedings being adjourned until 11 May 2023. The written submissions
The written submissions filed on behalf of Findex articulated the question as being whether the court had power to make order 1 sought in the application, that is, “could the court make order 1”. They contended that there was a discretionary power to set aside a direction if it was in the interests of justice and that it would be if the previous decision had been based upon some misapprehension of the facts or the relevant law which could not be attributed solely to the neglect or default of the plaintiffs.
The submissions indicated that whether the court “should make order 1” would arise if the court decided that it had power to make order 1 and that would be the occasion make findings about the correctness of the plaintiff’s grounds and an evaluative assessment about how any such findings engaged interests of justice”. Those contentions were elaborated on in a manner which clearly exposed the conceptual basis upon which an interlocutory order may be reopened.
The submission on behalf of Mr McKay contended that the issues for determination were: (a) what precise power the plaintiffs seek to invoke to set aside the order; and (b) the grounds for doing so.
The submissions contended that there was “no justifiable basis for the court entertaining vacating the order” previously made. They submitted that there was a very high bar to justify the invocation of the court’s power to vary an order made after a contested interlocutory hearing.
A substantial part of the submissions then articulated “a fundamental and conclusive anterior basis” upon which the application should be rejected, namely, the rule articulated in Gray v Sirtex precluding recovery of costs as damages. The submissions pointed to discretionary considerations against the present application. It made submissions about the factual history of the amendment to the pleadings. The ultimate submission was that order 1 should be refused and that upon rejection of that order “the entire application should be dismissed, with costs.” The hearing on 11 May 2023
The procedural fairness complaint discussed below requires a detailed understanding of what occurred during the hearing on 11 May 2023.
Senior counsel who appeared for Findex moved on order 1 of the application and read the affidavit of Amy Zhang dated 28 April 2023 and tendered tab 4 of the exhibit. Tab 4 of the exhibit was the Amended Statement of Claim filed on 9 October 2020. The affidavit itself referred to the earlier filed evidence that may be relied upon for the purposes of the application. It also dealt with the following matters arising out of the reasons given by the primary judge on 23 March 2023: (a) that although the current proceedings were commenced in NSW Supreme Court on 1 March 2019 there was an agreement between the parties that the matter would be held in abeyance pending the determination of the applications before Ward CJ in Eq; (b) that although most aspects of the matter had been determined by September 2019, there were ancillary matters that continued until April 2020; (c) a summary of the complex procedural history of the proceedings following the cross-vesting of the current proceedings to the ACT Supreme Court in June 2019; (d) a summary of events following the judgment of McWilliam AsJ in July 2022; (e) the procedural history of the application for leave to file the February proposed Further Amended Statement of Claim; and (f) communications between the parties following the decision on 23 March 2023.
Counsel for Mr McKay did not formally object but submitted that there was a limit on the matters that could be relied upon to establish an error in the circumstances of this application. Her Honour admitted the material on the basis that she would hear counsel for Mr McKay’s submissions on that issue.
Senior counsel for Findex indicated that the issue he was addressing was “does the court have power to make order 1 on the grounds on which we ask it to do so”. Counsel for Mr McKay interrupted and said that he understood that the court was determining order 1 today as opposed to some anterior question of whether or not there was power. He indicated that he was prepared to argue order 1. Her Honour then turned to senior counsel for Findex and said: Yes, Mr Neil, is that – is that clear? I think it’s a nuance, but I think it might assist in focusing your submissions. It is not contended on behalf of Mr McKay that the court lacks authority to vary an interlocutory order, but the question is what power is invoked here and – and what principles should govern that determination?
Senior counsel for Findex said: “I’m happy to proceed upon that basis” and that it would “shorten something of what we had proposed to say.”
Senior counsel then took her Honour to passages from an authority. There was a discussion with her Honour in which she raised some authorities in NSW and said “there is sometimes criticism where the matter is one that could readily have been raised with the primary judge for correction”. She continued: This is, obviously we are not dealing with the substance today, but this might sit, or be seen to sit somewhere on the fuzzy border of that question, that it’s – it’s a large correction. You know, it’s, in effect, you’re seeking to have leave to make an amendment that I have refused.
There was then further discussion as to what had occurred on 23 March 2023. Senior counsel then addressed the contention that it was necessary to point to a change in circumstances and made reference to some of the authorities collected in the written submissions. He made specific reference to the decision in Notaras v St George Bank Ltd [2005] ACTSC 5; 157 ACTR 1 which he submitted did not accept that demonstration of change circumstances was a necessary condition for the jurisdiction to reopen an interlocutory order. He submitted that it was not a case involving a change of circumstances but that “it would be in the interests of justice, in the circumstances of this case, to set aside the direction … and revisit your Honour’s underlying reasons, in order that the matter not proceed on the basis of the misconceptions of facts or law that we have … identified. That – that’s the way the case is put.”
Her Honour said “and I know we’re not dealing with – with the merits today …” but asked whether there was anything that senior counsel wished to say about the contention that costs could not be recovered as damages. Senior counsel said, “The first is to make the obvious point – as your Honour has averted to a moment ago – that full consideration of that proposition is really something that would arise on order 2 rather than order 1 in our application.” Her Honour pointed out that it was an issue that she had dealt with in her judgment. Senior counsel for Findex indicated that her Honour’s observation at [79] was not a concluded view. He also submitted that the paragraph contained a factual misapprehension that the search order proceedings were not against Mr McKay but against other parties, iiNet and LinkedIn. He also submitted that the legal contention “really was a General Steel question”. Her Honour challenged this saying that it was an application to amend pleadings well after the time for the closure of pleadings on ordinary case management principles. Her Honour described the General Steel test as “a test for kicking out, not letting in”. Senior counsel for Findex indicated that the issue would arise if one of the grounds of opposition was that the claim was not maintainable in the matter of law.
Senior counsel then turned to a submission about the newness of the costs claim: Now, here, could I point to the circumstances and – and in doing so I’m going to trespass a little upon the merits of – of order 1, which is not what we are here to, necessarily to deal with, but – or the merits of the amendment, order 2, which is not what we are here to deal with, but your Honour will recall that – well, indeed, as we read your Honour’s reasons, one important consideration in – in your Honour’s decision to, not to permit the amendment, to — to raise what – what the parties in their submissions are calling the costs claim, the claim, as damages in these proceedings for costs associated with the search order proceedings and the investigation that preceded it, but one reason that – that was important in your Honour’s reasoning towards that decision was the premise, the factual premise that the claim, the costs claim was new--- … - - - and that its introduction would, it would expand the scope of the proceedings beyond that which had previously been notified …
He indicated that Findex’s contention was that those factual propositions were wrong. He summarised some of the procedural history surrounding the introduction of the claim in the particulars to paragraph 110 and submitted that the proposed claim was “a disaggregation of a claim that was already there”.
Counsel for Mr McKay then made his submissions. He indicated that there was no great difference between the parties as to the principles. He referred her Honour to her decision in Liu v The Age Company Pty Ltd (No 2) [2015] NSWSC 276. He agreed with senior counsel for Findex that whether it was in the interests of justice for an interlocutory order to be varied was “always the ultimate touchstone”. He submitted that the present case was one involving an interlocutory order of a substantive nature made after a contested hearing. He submitted that an application to set aside vary or discharge an order must be founded on a material change in circumstances or the discovery of new material that could not reasonably have been put before the court on the hearing of the original application. He submitted that Findex did not like the decision that had been made but did not “point to any material change in circumstances at all”. He referred to the NSW Court of Appeal’s decision in Liu v The Age Company Pty [2016] NSWCA 115; 92 NSWLR 679 and the decision in Notaras. He submitted “when one assesses the overarching principles of justice here, in my submission, your Honour would readily reject this – this application, order 1 of it, for a number of reasons”.
He submitted that Mr McKay was a party to the earlier proceedings because even though not identified initially, once he had been identified the other defendants “dropped out”, having provided the required information. The proceeding then went on for three years between Findex and Mr McKay.
He then referred to her Honour’s earlier reasons identifying that her Honour had referred to the timing of the application and also concluded that none of the authorities put forward by Findex supported the proposed claim. He submitted that this involved a determination by her Honour on a discrete basis that was not challenged in Findex’s application.
He then turned to address the six asserted errors. He submitted that no error had been made out. He addressed the alleged error that the claim was raised for the first time and made substantial submissions about the procedural history. He then indicated he was going to run through the balance of the grounds of the application. Her Honour interrupted him and said: HER HONOUR: Just before you do that, Mr Karam. I do want to hear whether Mr Neil has any objection given the truncated process we foreshadowed. Mr Neil, are you content that for Mr Karam to briefly address the alleged incorrect assumptions? I think it would assist me, but I don’t want you to feel taken by surprise. MR NEIL: I have no difficulty, your Honour. HER HONOUR: Thank you, and you, of course, can reply MR NEIL: Yes, your Honour, although your Honour has already seen we put on an awful lot of writing about all of that in the application - - - HER HONOUR: Well, that – that - - - MR NEIL: - - - so I don’t want to weary your Honour by going there again. HER HONOUR: I’m mindful of that in thinking that it will assist me to hear from Mr Karam, so - - - MR NEIL: If your Honour pleases.
Counsel for Mr McKay said he was not proposing to address the 17 pages of grounds but addressed his position on the incorrectness of the assumptions.
He then addressed, over the following four pages of transcript, the six matters identified in the summary of the errors identified in the application in proceeding. He submitted that in relation to each of the matters no error was demonstrated. His submission was that at a case management level the court would not entertain the application because there had been substantive argument and no change of circumstances. He submitted that the appropriate course if there was a material error would be to take the matter on appeal. He then submitted that the notice of contention point was a substantive problem.
Senior counsel for Findex submitted that her Honour’s earlier reasons should not be taken to be “the expression of a concluded holding” that a costs as damages claim was not available.
Her Honour indicated “that may be so” but raised the availability of a specialised costs assessment system and the prospect of having to relitigate the whole case to prove costs as damages. Senior counsel indicated that he raised the point about the availability of costs as damages because it was raised by counsel for Mr McKay but had not been the subject of any point taken at the hearing on 22 March 2023 before her Honour. Her Honour then returned to her point that to prove costs in proceedings “is a big proposition” and queried what would be necessary to prove the claim.
Senior counsel for Findex submitted that it would take “almost no time at all” to prove. There was then a discussion as to how reasonableness of the costs might be proved. Senior counsel for Findex submitted that the principle was that “one can’t claim in a second set of proceedings something that in another proceeding it has been conclusively determined one can’t have”.
Her Honour queried how the reasonableness or causation in a contract claim could be proved and said: “that’s what makes it such an – such an unusual and large claim, because it’s – it’s, effectively, going against centuries of understanding that costs don’t get dealt with as damages.” Senior counsel for Findex responded: Our – our fundamental answer to this notice of contention point is that it’s not a point that arises now. It’s not a point. It is a large point. It’s a complex point. Now that it has been raised it deserves a considered argument if it is something that your Honour considers should be dealt with at an interlocutory stage. We accept the defendant has raised it and – and it must be dealt with, but at the heel of the hunt – the heel of the hunt with a two-hour hearing devoted to the question of power is not the occasion to do this. This is an order 2 point, not an order 1 point, properly understood. That’s – that’s our principal response.
He then asked for a short adjournment. Before the adjournment her Honour raised again the prospect that if costs were dealt with by the judge, then the judge would “hear argument about the reasonableness of every step in that lengthy litigation in another state” and said that “seem to me to be a relevant case management consideration” in determining whether to allow the amendment.
Following the adjournment, senior counsel for Findex indicated that he had an adequate opportunity to consult with his junior. He referred the court to the addition to the pleading that was the subject of order 2 that the costs be “assessed” costs and that Findex was not asking to have the court embark on that assessment.
He then made a submission in response to the submission that the claim for costs associated with investigation and prosecution of the search order proceedings was new. He submitted that the legal availability of a claim for damages was properly a matter that arose under order 2, “it never having arisen before 9 May”. He indicated he was not able to address it “in … the context of this limited hearing” and if Findex was successful on the day, the issue should be reserved for another occasion.
He accepted that Mr McKay had subsequently become a party to the search order proceedings but was not a party initially. Her Honour asked whether Findex would submit that the claim for costs under contract may be more readily obtainable than a discretionary award of costs against Mr McKay in proceedings before he was a party to those proceedings. Senior counsel for Findex agreed.
He then addressed whether or not demonstration of a change of circumstances was an essential element of the invocation of the jurisdiction and submitted that the capacity to reopen was not limited to those circumstances and that a misapprehension of fact or law is one of the other circumstances.
Finally, he made a reference to the decision of Refshauge J in Commonwealth v Davis Samuel Pty Ltd (No 12) [2020] ACTSC 312 at [111].
Her Honour then sought additional submissions from counsel for Mr McKay addressing her understanding that it was not intended that the judge hearing the case undertake the process of assessment. Counsel for Mr McKay said there was no order sought referring the issue of costs off to a registrar for assessment. He submitted that each of the facts that were pleaded in the subparagraphs of paragraph 109 would still need to be proven. He also emphasised the operation of r 1720 which he submitted precluded the recovery of costs in different proceedings.
Her Honour indicated that she would give her reasons next day. The Reopening Decision of 12 May 2023: [2023] ACTSC 108
Her Honour gave her reasons orally on 12 May 2023. She referred to her earlier decision and the orders that had been proposed to advance the matter. She referred to the fact that counsel for Findex had, at the conclusion of her reasons, raised a misapprehension as to the history of the claim and set out the passages from the transcript. She then referred to the application in proceeding dated 28 April 2023 and set out the orders which were sought.
She then referred to what had occurred at the first return of the application and the submission by counsel for Mr McKay that “it was not clear to him the basis on which the Court was invited to vacate an order made after a contested hearing and the publication of considered reasons”. Her Honour indicated that “I determined first to hear submissions from the parties on the preliminary issue raised by order 1, namely whether the Court should take the step of vacating the direction made on 23 March 2023”.
She indicated that the submissions made by the parties were “helpful in distilling the relevant principles” and that counsel for Mr McKay had “to some extent resiled from his initial position” and, so far as he acknowledged, that it was not necessary for Findex to establish a change of circumstances. She then set out the principles applicable in the form that they appeared in counsel for Mr McKay’s submissions and the authorities from which they were derived. She concluded that the touchstone for the present determination was the interests of justice. She said, “it is necessary first to look closely at the incorrect assumptions the Findex parties contend infected my judgment”. Her Honour then addressed each of the alleged incorrect assumptions.
The first and second assumptions were dealt with together. They were that the claim for damages was new and that it had not previously formed part of the proceedings. Her Honour accepted that the earlier judgment “proceeded on an understanding that there was a measure of newness to that aspect of the claim”. She then set out what, if anything, appeared in relation to the costs claim in the March 2019 version of the claim, the claim as filed on 9 October 2020 and the version of the pleading that was subject to her earlier judgment. Her Honour recorded that what was sought was the whole of the costs of the separate legal proceedings except to the extent that Mr McKay proves those costs have been unreasonably incurred or are of an unreasonable amount. She also recognised that the particulars in the present application had identified that the costs were “assessed” as distinct from the claim considered in the earlier judgment.
Her Honour indicated that in her earlier judgment she had referred to the Amended Statement of Claim as a proposed amendment which was not allowed. She identified that leave was granted by McWilliam AsJ on the understanding that the entitlement to object to it was reserved. Her Honour characterised the position as involving “a distinction without a difference”.
So far as the lateness of the pleading is concerned, she referred to her assumption that the claim was introduced “at this very late stage of the proceedings” (Amendment Decision [74]) and the contention that this was in error because the amended pleading had in fact been served on Mr McKay as early as November 2019. Her Honour said: It should be observed that even that date was late. Ordinarily, a party files a defence to a Statement of Claim within a month of its being filed and served. The complaint that I was wrong to describe as “late” an amendment which had been notified to Mr McKay some eight months after the original pleading is, in my assessment, unfounded.
She then drew attention to the fact that the amended pleading was not articulated with clarity and did not describe the expenses as “legal” expenses and hence, did not unequivocally indicate an intention to claim legal costs. However, she accepted for the purposes of argument that both parties understood the particulars as being “a reference or a nod to the prospect of a claim for the costs of the preliminary discovery proceedings as damages”.
Her Honour then turned to the third incorrect assumption that “it is not possible on an application of the present kind to explore the merits” of the submission that Findex was not responsible for the application being made at a very late stage of proceedings. Her Honour said (at [23]-[24]): … With great respect to those representing the Findex parties, that submission reflects the theme of the submissions put yesterday that they were entitled to the amendment unless someone else could establish why it should not be allowed. That is in circumstances where there has been no explanation drawn to my attention or emphasised in any of the submissions made to me as to why the claim was not included in the original pleading. An originating process is not an invitation to a party. It is a document which should crystallise the issues as to which the Courts jurisdiction will be invoked. I still do not understand why the claim for costs was not included in the originating process, because that has not been emphasised to me in any submissions put before the Court.
In relation to the fourth incorrect assumption that the costs claim would “give rise to a claim of extremely large scope and would expand the scope of the proceedings”, her Honour was not satisfied that her approach was “unfounded”. That was because it was only in the further iteration of the pleading that the language of “assessment” of those costs was introduced.
The fifth incorrect assumption was that the claim failed to specify whether the claims for damages were based upon the contractual claim or statutory cause of action. The Findex parties contended that it was both. Her Honour said, “That does not meet the point I was making in the judgment and I am not persuaded that it is an issue that warrants revisiting.”
The sixth incorrect assumption was that the Further Amended Statement of Claim introduced further parties and that it was confusing and embarrassing to do so without making any attempt to make them parties to the proceedings. Her Honour said that it was a matter that she dealt with in the judgment and did not raise any basis for revisiting her ruling.
Her Honour then identified that “the principal issue” is the question of claiming the costs of other proceedings as damages in these proceedings. She accepted that was “a difficult issue”.
Her Honour then turned to consider whether or not she should reopen her judgment. She accepted that the touchstone is whether the interests of justice warrant the revisiting of the ruling. She indicated that the process she had adopted of determining “effectively as a preliminary question whether I should intervene with the ruling carefully argued in the last occasion” warranted explanation.
She set out s 5A of the Court Procedures Act 2004 (ACT). Her Honour then characterised “much of the argument put by the Findex parties yesterday” as proceeding on the assumption that unless Mr McKay could establish the claim was not maintainable at law then it should be allowed at this stage. She referred to the earlier exchange that she had with senior counsel for Findex.
Her Honour indicated that her decision to disallow the claim was not on the basis that it was not maintainable at law. She accepted that she was wrong to the extent that she proceeded on an understanding that the Amended Statement of Claim had not been filed but said “The difficulty the plaintiffs have never grappled with is that this is an issue which was determined by me at a case management level.” Her Honour referred to the submission made by counsel for Mr McKay that the ruling should not be revisited “because in all the circumstances of this case that amendment should not be allowed at this stage”. Her Honour said that she rejected the submission that it was an incorrect assumption that the claim would add considerably to the scope of the proceedings. That was because it did appear to be a case “which would put the Court in the shoes of a costs assessor”. She continued “That has been clarified and perhaps that would make some difference. It is difficult to know the full scope of that.”
Her Honour then referred to the orders that she had contemplated would be made following her previous judgment, namely that a further draft Amended Statement of Claim be provided with full and proper pleadings and particulars in place of paragraph 110. Her Honour referred to what had occurred at the hearing on 11 April 2023 and she said that she still did not understand “why, if it be correct that the claim for legal costs did sit on the Amended Statement of Claim and paragraph 110, the Findex parties cannot now maintain that claim by fully particularising it in the manner proposed in the orders propounded by [counsel for Mr McKay]”.
Finally, she identified three of the reasons in addition to the “General Steel issues” already addressed: (a) first, no explanation “has been brought forward or at least made clear to me as to why the amendment as between the original statement of claim and the amended statement of claim was made”; (b) second, she remained of the view that even with the concession of assessment according to the rules the claim “will expand the scope of these proceedings”; and (c) third, the Findex parties have a mechanism for recovering their costs by claiming them in the proceedings in which they were incurred.
In relation to this third, point her Honour said: As an aspect of the present application, they seek to have those proceedings joined with these proceedings. In that event, the same judicial officer will have the same evidence before them and will be fully equipped to make an appropriate determination about the costs in the forum of the preliminary discovery proceedings.
Her Honour concluded: For those reasons, I decline to make order 1 in the application. It follows that the application is dismissed. As I have endeavoured to explain, however the regime contemplated in my earlier judgment at [82] should not foreclose the Findex parties from providing full and proper pleadings and particulars in support of whatever claims were pleaded in the amended statement of claim.
At the conclusion of the reasons, counsel for Findex attempted to point out that the written submissions had identified the question to be argued as whether the court had power to make order 1 and that the question of whether to make order 1 would arise if the court had power to do so. He continued: “But we didn’t understand that …” but was cut off by the primary judge. The primary judge indicated that if he wished to challenge her discretionary decision he could apply for leave to the Court of Appeal. Factual Errors Established
There are a number of difficulties with this approach. First, if reliance was to be placed upon the lateness of the amendment, then the extent of lateness was a relevant consideration. The Amendment Decision characterised the lateness as being the whole of the period since commencement. The Reopening Decision characterised the lateness as being the period between commencement in March 2019 and November 2019. If that period is indicative of unwarranted delay then it involved a very different period of delay and an apparent acceptance that the period since November 2019 did not tell against the making of the amendment. The Reopening Decision did not adequately recognise the significant alteration in the basis for the decision.
Second, as was apparent in the extensive procedural history which was before the primary judge on the Reopening Decision, there was a reasonable explanation for even that revised period of delay relied upon by the primary judge. The evidence that was before the primary judge by the time of the Reopening Decision included the affidavit of Lauren Brouwer-French dated 21 March 2023, the affidavit of Amy Zhang dated 28 April 2023 and Exhibit C to the affidavit of Bede Webster dated 20 March 2023. Most significantly, that evidence indicated that: (a) The preliminary discovery and search order proceedings led to disputes over access to the Disputed Documents and that the application for release from the Harman undertaking in relation to the seized documents was deferred until after the access to the disputed documents was determined. (b) The position adopted by Findex was that it “wished to see all of the documents which gave rise to a potential cause of action before instituting proceedings, so that one action, with all the causes of action and claims could be instituted”: Affidavit of Lauren Brouwer-French at paragraph 29(a). (c) Following the commencement of proceedings in March 2019 “by consent, no steps were taken in those proceedings pending the determination of the extant motions in the Preliminary Discovery and Search Order proceedings”: Affidavit of Lauren Brouwer-French paragraph 29(b). (d) Although most of the application relating to access to documents was determined in September 2019 there were ancillary matters that were determined by the NSW Supreme Court during the period between September 2019 in April 2020. (e) As at December 2019, Mr McKay had indicated that, so far as the proposed amended pleading was concerned, “no AON v ANU like issues arise”.
This was compelling evidence which explained the lack of attempt to amend the pleadings between March and at least November 2019. There was no direct evidence as to why the claim for damages for investigation and action was not included in the original claim. However, in circumstances where pleadings were being drafted in the context of disputes over the outcome of long contested proceedings about access to documents and restraints under the Harman undertaking, the court should be slow to attribute fault to the plaintiffs.
Third, and relevant to the question of a denial of procedural fairness, had this period of delay ever been identified by Mr McKay or the primary judge as an issue relevant to the merits of the application for amendment, then there is no doubt that counsel for Findex would have addressed on the issue and, if necessary, sought to lead additional evidence about it from amongst the evidence referred to at paragraphs 5-6 in the affidavit of Lauren Brouwer-French dated 21 March 2022. That would have included reference to the fact that a draft Amended Statement of Claim containing the claim for the costs of investigation and action had been served in June 2019 in support of an application to be released from the Harman undertaking.
Fourth, because of the mischaracterisation of the costs claim as new, the Reopening Decision did not address the significance of the fact that leave had already been granted to pursue it, through it being included in the 9 October 2022 pleading which was then subject to the strike out and summary judgment application and judgment. Having regard to the inclusion, by leave, of the costs claim in October 2020, it was not then appropriate to refuse a subsequent application to amend that claim on the basis of some earlier “delay” predating October 2020 which had not been deployed by Mr McKay in opposition to the October 2020 amendments.
This is a case in which the procedural history of the matter was a very important aspect of the context in which the appropriateness of the application to amend was to be determined. Her Honour erred in failing to conclude that, in the very unusual circumstances of this case, any period of delay between March 2019 and November 2019 was not of significance for the purpose of determining whether or not to permit leave to make the amendment. The error involved a significant factual misconception of a type which was appropriate to draw to the attention of the primary judge following the making of her Amendment Decision.
It can be accepted that reasonable minds will differ as to the consequences for the length and complexity of a trial of an additional claim. The claim for legal costs incurred as a consequence of a breach of contract claim would be for the whole of those costs. There may be some qualifications upon costs which are recoverable if they were obviously excessive. That might involve questions of causation, remoteness or a failure to mitigate. However, the likelihood is that the factual steps that were taken would be objectively provable and uncontroversial. The amount paid for the legal services would be readily documented and easily summarised. The spectre of the court being involved in an item-by-item assessment exercise was a remote one. If, during the course of the preparation of the case or at the hearing, it emerged that there was a real prospect of such a requirement, then a referral of a discrete damages assessment exercise to a registrar was (and remains) a procedural technique available to relieve the court of that burden.
Even if the determination of the costs claim was more complicated than indicated above, any such complexity needed to be assessed in the context of the claim as a whole and the complexity of the other proceedings that were before the court. Those, of course, included the search order proceedings in which the costs issue remained live. It could not be said that the addition of a costs claim, when compared with the other aspects of the dispute, involve any significant addition to the complexity of the cases overall. Further, the court would, in any event, have to be familiar with the procedural aspects of the search order proceedings in order to properly determine the appropriate discretionary costs order, if that was to be the basis for recovery rather than through the claim in contract.
In any event, the fact that a claim may be complex or add to the court time necessary to determine it is not, of itself, a reason to refuse a grant of leave to amend a pleading so as to include it. It may well be a reason to refuse a grant of leave if there were considerations of the claim delaying the progress of the litigation or, as here, an alternative mechanism of recovery through a costs assessment process. However, it is those factors rather than the bare magnitude of the exercise involved that would be the relevant ones to consider.
If reliance was to be placed upon the existence of an alternate means of recovery of those costs as a reason to refuse leave to amend, the court would need to be satisfied that the alternative was an equivalent one or consider the extent of any difference. In the present case, the differences arose from the discretionary nature of the awarding of costs under the order and the uncertainty as to which of the entities had incurred, or incurred liability for, those costs. That required the issue of equivalence to be examined and considered. Such engagement with the issue is not apparent from the reasoning of the primary judge.
The error in relation to the categorisation of the consequences of granting an amendment and the failure by the primary judge to consider the proposed amendment in the context of the issues that would arise in the proceedings and the other proceedings likely to be heard by the court were not issues of the type that were suitable for a reopening of the decision. They were not frank factual misconceptions. Instead, they were errors which ought properly to have been the subject of an application for leave to appeal. However, the relevance here is that they are matters which may have been subject to reagitation had the primary judge reopened the Amendment Decision, particularly in light of the clarification provided in the revised proposed pleading which made it clear (if it was not already) that Findex did not intend the court itself to engage in an exercise equivalent to a costs assessment. Potential to include claim in paragraph 110: (Reopening Decision [38]) (ground of appeal 8)
Her Honour made it clear in the passage referred to at [162] above that she did not understand why the claim for legal costs could not be maintained by fully particularising it in the manner that had been proposed. Insofar as her Honour thought that there was a capacity to take such a course, it would have been a significant factor in refusing leave to reopen the Amendment Decision.
The difficulty with that course is that any attempt to include the claim for costs in the particularisation of paragraph 110 based upon the earlier provided particulars would inevitably be met with the submission that leave had been refused to include that aspect of the claim as part of the Amendment Decision. In other words, it would be met with precisely the argument that was put by Mr McKay on the reopening application, that the issue had been determined after a contested hearing and should not be reopened.
The pleading at paragraphs 109.1-109.19 involved a substantial “unrolling” of the particulars earlier provided to paragraph 110. The detail of the unrolling may have been excessive but was plainly designed to avoid any criticism of a failure to set out the material facts that would have been made if the claim for the costs of investigation and action had been pleaded more succinctly.
Once the procedural history of the proceedings is appreciated, in particular, the notice of the intention to claim the costs of investigation and action as early as June 2019 and the grants of leave to include such a claim in October 2020, the intention to “unroll” the claim was understandable. In the context of the level of procedural disputation in the various proceedings it is also understandable that it would be “unrolled” by a detailed pleading of its factual basis. If her Honour was to rely upon the potential to replead paragraph 110 as a basis for refusing leave to reopen her decision, then that could only be a factor favouring a refusal of leave if she was later willing to depart from her refusal to entertain the costs claim on “case management grounds”. Yet, the Reopening Decision indicated that she was not prepared to depart from that refusal. Thus, the outcome appeared to contain two inconsistent lines of reasoning: (a) the court refuses to allow Findex to further plead the costs claim because of “case management reasons”; and (b) the court will not reopen its decision because, inter alia, Findex can still plead this claim.
If these two propositions were not entirely inconsistent, then the reasons given by the court did not explain why, and to what extent, that was the case. In those circumstances it was an error in refusing to reopen the Amendment Decision to rely upon the capacity to plead the costs claim when the court had refused leave to plead the costs claim. Denial of procedural fairness – order 1 (ground of appeal 1)
Denial of procedural fairness is raised by ground 1 in the draft Notice of Appeal.
The principal errors identified above are those relating to the lateness of the application and the reasons for the application being made when it was. These errors arise from a failure by the primary judge to take into account the details of the procedural history of the matter that was in evidence before her. However, it was contributed to by a series of matters leading up to the hearing on 22 March 2023 and then again the hearing on 11 May 2023 which deprived Findex of a fair opportunity to address the matters ultimately relied upon by her Honour in the Reopening Decision. The series of events can be summarised as follows.
Following the decision of McWilliam AsJ to dismiss Mr McKay’s summary judgment and strikeout application except in relation to paragraph 110, no timetable was set requiring the filing of an amended pleading. Instead, the parties were engaged in resolving the issue of costs of that application and that was only finalised in March 2023.
At the hearing on 15 December 2023, her Honour declined the offer by counsel for Findex to provide a chronology of the proceedings. Her Honour did make a direction relating to identification of objections to an amended pleading. Initially on 2 March 2023, Mr McKay indicated that the amendments were unlikely to be opposed but then on 10 March 2023 provided, after the relevant date, an uninformative statement of the grounds of opposition to the inclusion of the costs claim.
At the commencement of the hearing on the amendment application on 22 March 2023, two affidavits were read by Findex in support of the application. The first one (Lauren Brouwer-French 16 February 2023), simply explained that the amendment was consequential upon the striking out of paragraph 110. The second one (Lauren Brouwer-French 21 March 2023) was targeted at responding to the affidavit read by Mr McKay (the body of which was not included in the appeal books). It indicated at paragraph 5 that a series of other affidavits were referred to and relied upon (“I refer to and rely upon …”). The status of these affidavits was never clarified but they were not formally read on the application. As a consequence, they were not in evidence before the primary judge: In the matter of Prime City Investments Pty Ltd [2012] NSWSC 1287 at [6], even if they might have been read if an issue arose relating to the procedural history that required going beyond what was formally in evidence.
Significantly, the 21 March 2023 affidavit contained some of the explanations of the procedural history of the matter relevant to the timing of the application for leave to amend.
However, when counsel for Findex read the affidavit, there was the exchange referred to at [85] above in which her Honour indicated that she was not sure what it went to, as it was “just a procedural …” and asked counsel to “come to the main game”. As a result, counsel indicated that he would only deal with the matter in response to any submissions made by counsel for Mr McKay. Her Honour said “just address me about your new damages pleading?”. As a consequence the primary judge discouraged submissions relating to the procedural history relevant to the making of the application.
It was in that context that counsel addressed the primary judge and dealt with any question of delay in reply. He did so in the context of the affidavit evidence of Ms Lauren Brouwer-French of 21 March 2023 which specifically included (at paragraph 29(b)) evidence that the parties had consented to no steps being taken in the disparagement proceedings after their commencement, pending the determination of motions in the search order proceedings. It also discussed events following the decision of McWilliam AsJ on Mr McKay’s attempt to terminate the proceedings.
It was in that context that her Honour then made the finding that it was not possible to resolve the issue and that the amendment was sought to be made at a “very late stage” being “the time commenced without the pleadings progressing in any way”: Amendment Decision at [74]-[75]. While it was a fact that the proceedings had been on foot for four years and it was a fact that no defences had been filed, those two facts could not be reasonably deployed in opposition to the making of an amendment without at least considering the procedural history which explained why that was the case.
Having dealt with the matter in this way, following the making of the 28 April 2023 application, the direction was made on 3 May 2023 that the 28 April 2023 application not be dealt with as a whole but instead the question of power be addressed first. It was clear from the written submissions provided on behalf of Findex that counsel understood that the question was a limited one as to the scope of power to reopen an interlocutory decision such as that made on 23 March. The written submissions of Mr McKay framed the issue differently and raised, for the first time, the point raised on this application in its notice of contention.
It is clear that the scope of the issue the subject of submissions expanded during the course of the hearing on 11 May. The difficulty is that the extent to which the issue had expanded was never made clear. That is indicated by the following remarks by the primary judge during the course of submissions: (a) “the question is what power is invoked here and … what principles should govern that determination”: [122] above. (b) “obviously we are not dealing with the substance today”: [124] above. (c) “I know we’re not dealing with the merits today …”: [126] above. (d) “Mr Neil, are you content for Mr Karam to briefly address the alleged incorrect assumptions? I think it would assist me, but I don’t want you to feel taken by surprise”: [132] above.
The manner in which her Honour ultimately dealt with the issue involved, in substance, dealing with the merits of both orders 1 and 2 in the context of deciding whether to make order 1. That conclusion requires some explanation.
Whether or not to reopen an interlocutory order as a result of errors or misapprehensions identified in the reasons for that order must be dependent upon both the existence of errors and their significance for the interlocutory decision that was made. In the present case, except for some relatively minor amendments, the proposed Further Amended Statement of Claim was the same as that which had been rejected in the Amendment Decision. In those circumstances what was involved in determining order 1 could involve either: (a) determining whether there was power to reopen and deciding whether to reopen without determining the outcome of that reopening; or (b) determining whether there was power to reopen and deciding whether to reopen based upon a determination of the merits of the application to amend that would be the subject of the reopening.
The former approach might allow the decision to be reopened even if the ultimate result was that there should be no variation to the earlier order. The latter course would only involve reopening if a different result would be reached on the substantive application to amend. On this latter approach, if the consideration of order 1 went beyond whether such an order could be made to whether it should be made, it would necessarily involve determination of order 2. That is, in fact, how the primary judge dealt with the issue. In deciding whether to reopen her earlier decision she considered both the existence of errors in her earlier reasons and the significance of those errors for the substantive decision that she made.
Such a course was certainly available to her Honour. Where a litigant must show cause to argue a claim, a court will routinely consider both whether cause is shown and the merit of the claim simultaneously. An example is an application for leave to appeal such as in this case.
However, her Honour, having decided to separate the application into two parts (at [108]-[113] above), never clearly indicated that she was departing from the approach that involved dealing only with a confined issue relating to order 1 or that the significance of the factual errors would be addressed without a further opportunity to make submissions.
It is true that senior counsel for Findex did indicate that he did not oppose the course that her Honour explained to him. However, the primary judge never clearly indicated that, having gone beyond the question of power, her Honour was going to adopt the latter course discussed above and hence, deal with both order 1 and order 2 issues in deciding whether to reopen the Amendment Decision. Consistent with that, in submissions in reply, senior counsel for Findex put only limited submissions in response to the substantive matters relating to the earlier reasons.
The significance of her Honour not having been addressed on the substance of the alleged errors in the original discretionary decision is illustrated by her comments in the Reopening Decision about a lack of explanation for delay and why the amendment was only made when it was and the conclusion that she reached about the significance of the eight-month “delay” between March 2019 and November 2019. The substance of the errors has been addressed above.
However, in the lead up to the Amendment Decision, her Honour had discouraged the provision of a chronology. At the commencement of argument on 22 March 2023 she had discouraged an explanation of the procedural history. In the Amendment Decision, the primary judge disavowed an attempt to determine the correctness of the submission made by counsel for Findex about the procedural history. When it came to the Reopening Decision, although her Honour did not appear to accept that she had made any error of significance, her reasons altered the emphasis in relation to the novelty of the pleading and in what respect the amendment was “late”. Yet, that conclusion was reached without reference to the evidence before the court in the Zhang affidavit and without the benefit of submissions in relation to its significance.
These features of the various hearings before the primary judge may explain her characterisation of Findex’s approach as one reflecting a sense of entitlement rather than properly seeking permission to amend: Amendment Decision at [34]; [154] above. Against a proper understanding of the procedural history, in particular, the early notice of the costs as damages claim (June 2019, November 2019 and October 2020 being the relevant dates) and the necessity to “unroll” the pleading in paragraph 110 of its pleadings, the expectation of being able to do what the decision of McWilliam AsJ required to be done was not unreasonable. It did not reflect an unprincipled sense of entitlement.
What is required by way of procedural fairness moulds to the particular circumstances of the case. This was an unusual case in which an understanding of the procedural history of the matter was significant in determining whether or not leave to amend should be granted. By a series of circumstances, the court narrowed the focus of the proceedings before it in a way that avoided an adequate explanation of the procedural history being the subject of submissions and then determined the application in a way that placed emphasis on the passage of time since the commencement of proceedings and the absence of the proposed claim in the original pleading, without considering the evidence that was before it or permitting submissions to be made on the point ultimately determined against Findex.
We emphasise that the primary judge’s attempt to narrow the focus was entirely understandable in the face of volumes of material and time estimates of counsel that went beyond what would ordinarily be required to dispose of a procedural application following paragraph being struck out in a pleading. However, in the particular circumstances of this case, for the above reasons, this resulted in a denial of procedural fairness. Denial of procedural fairness – order 3 (ground of appeal 1.5, 3.1, 3.2, 3.3, 10(e))
A subsidiary question relates to the dismissal of order 3. That order in the application in proceeding dated 28 April 2023 sought that each of the proceedings involving Findex and Mr McKay be heard together and that evidence in one proceeding be evidence in the other proceeding.
Her Honour dismissed this application without hearing any submissions from Findex. Although order 1 contemplated the possibility that some aspect of the Amendment Decision may need to be set aside in order to permit order 3 to be made, the making of order 3 was not precluded as a matter of substance by the earlier Amendment Decision. The making of the order might have been inconsistent with the earlier order only to the extent to which the parties were to propose short minutes consistent with her Honour’s reasons in the Amendment Decision rather than addressing the separate topic of hearing the proceedings together.
It was certainly a possible outcome that, had her Honour given Findex the opportunity to address her in relation to order 3, that the order would have been made despite the fact there was no reopening of the substantive issues determined in the Amendment Decision.
Plainly enough, given the capacity to seek the direction at a later point in time, the denial of procedural fairness in relation to order 3 would not have warranted a grant of leave to appeal. However, given that leave to appeal is granted it is appropriate to address the substance of the ground with a view to removing future disputes between the parties about the potential consolidation of these disputes. The notice of contention
The notice of contention alleges that the decision of the primary judge should be confirmed because in the absence of any pleading of a relevant agreement between the parties or an applicable statutory provision, the costs claim is contrary to well-established common law principles and r 1720 of the Court Procedures Rules and hence is liable to be struck out upon the grounds set out in General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125 at 129.
The primary judge did not determine either application on the basis that the claim was manifestly groundless or any of the other formulations in General Steel. It was only on the reopening application that the issue was raised by Mr McKay. On that application, senior counsel for Findex indicated that the question was “a complex point” which would need considered argument on a separate occasion: [138] above. In her reasons for the Reopening Decision, the primary judge simply said that she accepted that the issue of claiming the costs of the other proceedings of damages “is a difficult issue”: Reopening Decision [29].
The conclusion reached above is that her Honour erred in the manner in which she addressed the question of the lateness of the application and that there was a denial of procedural fairness in reaching the conclusions that she did in the circumstances of the case. There was, however, no denial of procedural fairness in relation to the maintainability of the costs as damages claim because the primary judge accepted the submission that the question was a difficult one which would need to be argued, if at all, on a separate occasion.
Mr McKay contends that if leave to appeal is granted the appeal should be dismissed because the costs as damages claim is manifestly groundless. However, consistent with the approach taken by the primary judge, this is not a matter which should be finally determined in the context of an application to reopen.
The general principles are summarised in Gray v Sirtex Medical at [15]-[30]. In the present case the second plaintiff (Findex Services Pty Limited) was the contracting party for the purposes of the contractual claim. The claim for damages is put on the basis either of liability to the plaintiffs in the search order proceedings or alternatively to the second plaintiff as trustee. The second plaintiff was not, however, a party to the search order proceedings. It sues in contract on its own behalf and on behalf of the other plaintiffs. Those other plaintiffs include the first, fourth, fifth and sixth the plaintiffs who are also parties in the search order proceedings. Mr McKay was not initially a party (because his identity as the publisher of the statements generating the dispute was unknown and the search order proceedings were initially commenced against internet service and website providers) but he subsequently became a party to the proceedings. It is not clear what position Mr McKay will adopt in relation to the costs of the proceedings prior to his joinder. The claims under the Australian Consumer Law are made by each plaintiff.
It is not possible to say with the degree of certainty required by the General Steel test that each of these claims would be unarguable. The result of the contract claims is likely to be influenced by which of the parties are entitled to directly claim based upon the contract between Findex Services and Mr McKay and the consequences, if any, of the benefit of the contract being held on behalf of persons who were parties to the earlier proceedings. It may also be influenced by which plaintiff has paid the costs or is liable to do so, something which has not yet been clearly particularised. The relationship between the provisions of the statutes relied upon for the statutory claim, the common law rule and the provision of the Court Procedures Rules may also arise. As it is not possible to conclude to the requisite high degree that the line of authority summarised in Gray v Sirtex is fatal to the claim, that basis does not provide a separate reason for affirming the decision not to reopen the earlier Amendment Decision.
For these reasons the notice of contention will be dismissed.